Infrastructure borrowers turn to bonds — but loans still dominant
The funding dynamics for Latin America’s sweeping infrastructure deficit are changing sharply, say project sponsors and investors
Project bonds are increasingly stealing market share when it
comes to financing LatAm infrastructure, yet bank lending
remains the main source of funding for such operations.
Spanish engineering, construction and infrastructure
conglomerate Acciona focuses first on capital markets financing
when it looks at funding for any new project, Roberto Ventura,
the firm's finance director, told LatinFinance.
"We are trying to reduce our reliance on bank financing as a
result of the increasing reluctance of banks to provide
long-term financing, and our aversion to refinancing risk as
well as our goal of reducing exposure to Spanish and European
banks," Ventura said.
Pension funds and other institutional investors in Latin
America are emerging as a fast-growing source of financing for
infrastructure bond sales. "For issuances in local currencies
in countries such as Peru or Mexico, local pension funds and
insurance companies have been the dominant players," said
Jean-Valery Patin, head of Latin American project finance at
Nonetheless, the size of many project bonds can keep big
institutional investors away: "LatAm project finance bonds tend
to be quite small," said Bianca Taylor, an emerging market
credit analyst at US asset manager Loomis, Sayles &
"We normally look at bonds that are at least $500 million in
size, where we stand to get a decent allocation."
Bank loans also have other advantages, says Acciona's
Ventura: "Many investors are still relatively unsophisticated
and need some support to mitigate some risks they do not
understand or are unwilling to take. There is where the role of
banks may be crucial." LF
See the full article in the latest edition of LatinFinance:
Financing innovation: The way back